Which action would the management take if it wants to gain more ownership control of the firm?

a$.$ Issue more growth stocks

b$.$ Issue more common stock to the public

c$.$ Repay portions of its loans

d$.$ Repurchase shares of common stock

e$.$ Pay cumulative dividends to preferred stocks

If a preferred stock issue has a conversion feature, the stock can be converted into

a$.$ common stock

b$.$ corporate bonds

c$.$ bonds with voting rights

d$.$ cumulative stock

e$.$ founders stock

Chapter $8-$ Risk and Rates of Return

Indicate the answer choice that best completes the statement or answers the question.

Which of the following statements is correct?

a$.$ A security$\text{'}$s beta measures its diversifiable $($firm$-$specific$)$ risk relative to that of other securities$.$

b$.$ If the returns of two firms are negatively correlated, one of them must have a negative beta.

c$.$ A stock's beta is less relevant as a measure of risk to an investor with a well$-$diversified portfolio than to an investor who holds only one stock.

d$.$ Combining stocks that are perfectly negatively correlated and that have the same beta coefficient into a portfolio is riskier than holding an individual stock, because the portfolio will not benefit from diversification.

e$.$ A stock's beta can be calculated by comparing its returns to the market's returns over some time period because the beta coefficient measures a stock's volatility relative to market.

The part of a security$\text{'}$s risk associated with economic factors that affect all firms to some extent is known as the

a$.$ diversifiable risk

b$.$ unsystematic risk

c$.$ stand$-$alone risk

d$.$ market risk

e$.$ business risk

Which of the following statements about the various kinds of risks is correct?

a$.$ Economic risk is a market risk, hence it should not be rewarded by the market.

b$.$ A firm's default risk is a diversifiable risk, hence it should be rewarded by the market.

c$.$ Exchange rate risk is a diversifiable risk, hence it should not be rewarded by the market.

d$.$ Inflation risk is an unsystematic risk, hence it should not be rewarded by the market.

e$.$ Interest rate risk is a systematic risk, hence it should be rewarded by the market.